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Time share industry in india


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  • timeshare story in India & Abroad
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  • Hello,
    My wife and I are the owners of the 51st Week in Old Anchor Goa. They have started charging Rs4,000/annum maintenance fee, whether it is utilised or not(and do not help in renting) and its become a liability as now Rs24,000 are due for 6 years, as we are out and do not use it or can exchange it. Does Sterling Resorts also charge in similar manner ? Many thanks in advance for your inputs!
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  • first operational resort time share by STERLING RESORTS
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Time share industry in india

  1. 1. Time Share Industry in India© Ramakrishna Kongalla,Assistant ProfessorIndian Institute of Tourism & Travel Management(An Organization of Ministry of Tourism, Govt. of India)Rtist @ Tourism
  2. 2. • About– Condominium: Apartment– Timeshare: Timely Ownership– Fractionals: percentage share of an expensive asset• According to Oxford Dictionary timeshare is defined as “anarrangement whereby joint owners use a property as a holidayhome at different specified times” (, 2009).• As per Timeshare consumers’ association timeshare is definedas “form of holiday ownership”• One owns the right (either directly or through a "club") to usea week (or longer) in an apartment or villa on a holiday resortfor a great many years or in perpetuity” (TCA, 2005).Rtist @ Tourism
  3. 3. • The first timeshare plan was introduced in the US in 1968, with theconversion of a hotel in Hawaii, but not much was really heard oftimeshare there until the short-term collapse of the whole-ownershipcondominium sector in 1974.• During the oil crisis in the mid-1970s, coming after a building boom inFlorida, the idea of timeshare was adopted as the answer to the fallin the property market.• Lowering the prices of units by converting them into weekly intervalsmeant that more people could afford them.• Some uncertain condominium projects in St. Thomas, Fort Lauderdaleand Puerto Rico were converted into timeshare projects but, in theirdesperate haste to make a sale, many of the projects failed due topoor legal structuring, financing and marketing.•Rtist @ Tourism
  4. 4. • Although timeshare projects were on a small scale, fragmentedand relatively unregulated, timeshare had started to take offand by the end of the 1970s annual sales had risen to $50million (India Report, 2009).• Timeshare has evolved over the years from the fixed weeksystem to the latest points system though all the systems havetheir own pros and cons.• One of the biggest attractions of timesharing is the ability toexchange one’s timeshare week for a week at a differenttimeshare (Nelson, 2000).Rtist @ Tourism
  5. 5. • The Timeshare product is complex and there are many components thatare important for it to be successful, mainly the cooperation betweenDeveloper, the Marketing Company, the Exchange Company and Trustee(Revelas and Lagiewski, 2005).• Many operators have chosen to develop timeshare alongside traditionalhotel or other holiday accommodation developments.• These projects have been referred to as ‘mixed use’ resorts and this hasalready proved to be a winning formula in other markets, especially theUnited States (European timeshare study, 2001).• High satisfaction rates, affordability, and low market penetration holdthe promise for future industry growth (Resort timesharing worldwide,2003).Rtist @ Tourism
  6. 6. • In the 1960s, timeshare resorts were sold in “fixed-week” increments, whichsimply meant that the consumer was entitled to use the resort’s facilities at aset week, each week, every year for the length of the agreement.• In the 1970s and 1980s, consumers began demanding more flexibility in howthey could use their purchase, and the industry answered this concern with a“float week” offering. Simply, a floating week offering means that theconsumer is entitled to resort access rights within a specified range of weekswithin a calendar year or as specified within the contract.• a vacation club points system - the consumer simply purchases enough pointsto satisfy his annual vacation needs. This system offers the maximum amountof flexibility, in contrast this system is quite complex for the developer tomanage relative to inventory management purposes (Sherles andMarmorstone, (1994).Rtist @ Tourism
  7. 7. Three most common types of Timeshares are• (1) Deeded interests– He or she has obtained legal ownership of the villa for a weekly interval thatgrants the owner the right to use the property for the week specified in the deed.Under this deeded type of conveyance, the purchaser has the legal right to: (a)use the real property (villa) (b) the real property to a family member, or (c) sellthe real property at a point in which he or she no longer wants to use theproperty.• (2) Right-to-use:– The individual is given contractual rights to use the timeshare facilities for aspecified period of time. Upon expiration of this specified period (e.g., twentyyears), the purchaser’s rights of usage terminate unless he or she purchasesadditional time.• (3) Leasehold agreements:– The purchaser has the right to inhabit the timeshare unit for a specified period oftime, and at the termination of the lease, the property reverts to the timesharedeveloper.• One of the fundamental differences between a leasehold agreement and a right-to-use agreement is that the leasehold is of shorter duration than the right-to-usecontract (Suchman, 1999; ARDA, 2002b).Rtist @ Tourism
  8. 8. The Indian scenario• In India, the concept arrived quite late and wholesomelywelcomed since it meant buying future vacations at today’sprice.• There exists a tremendous potential for timesharing in theIndian market and only 0.069% of the market are members(Destination Resorts India Pvt. Ltd., 2004).• The timeshare industry is growing manifold with big brands suchas Resort Condominiums International (RCI), Ramada Hotels &Resorts, Club Mahindra, Hyatt Vacation Club, etc. entering thebusiness.Rtist @ Tourism
  9. 9. • Much of it still remains untapped and developers keep coming up with new,innovative and attractive deals (Sandhya and Unnikrishnan, 2009).• India and China are expected to be potential targets of vacation ownershipdevelopers in the long-term (Official Wire 2009).• The market for timeshare models in India is huge, and more importantly,domestic traffic is adopting a lifestyle that supports the timeshare model(Bhar, 2007).• The timeshare concept in India was introduced by Dalmia resorts in 1985(Dalmia resorts, 2007) after which Sterling resorts were fast to catch upwhich came in to existence in 1986.• During the years following incorporation, Sterling has built a network of 14resorts in 12 holiday destinations in India and is having a membership base ofover 100,000 Vacation Ownership members.Rtist @ Tourism
  10. 10. • In addition, the resorts in the Sterling network also offervacationers in India, the option of staying as a one-time hotelguest (Sterling resorts, 2011).• In today’s date one of the major players in timeshare industryin India is Club Mahindra which has over the years evolved aposition for itself and as of May 31, 2009, the Company washaving 19 branches and 61 retail outlets across India of which45 are owned and 16 are franchised.• The company was also able to sell 91,997 Club MahindraHoliday vacation ownership memberships.• The company was incorporated in September, 1996 in Chennaias Mahindra Holidays & Resorts India Private Limited.Rtist @ Tourism
  11. 11. • The status of Company was changed to a public limitedCompany by a special resolution of the members passed at ashareholders’ meeting held on January 29, 1998.• The company is having 11 owned resorts and 16 resorts havebeen leased. Of the total 1,261 apartments and cottages offered937 are owned, 252 are on long term leases and 72 are on shortterm leases (Club Mahindra, 2009).• According to India Report (2009) impact of branded hospitalityplayers and reputed conglomerates is the need of the hour.Rtist @ Tourism
  12. 12. • Potential consumers, while agreeing to the benefits of theproduct, have often cited the lack of branded players as theirreason for not purchasing timeshare, thus indicating arequirement for both credibility and glamour in the product.• Further the report indicates that the demand for timeshareproducts in India is likely to grow at about 16 per cent annuallyfrom 2006 to 2015, facilitated by supply growth of about 12 percent annually over the same period.• This is reflected by the growth in holiday exchange bookingsthat increased by 28 per cent in January-November 2008.Rtist @ Tourism
  13. 13. • The average unit sale for a typical timeshare development islikely to grow at 3 per cent annually from 2006 to 2015.• The average unit cost per day for a consumer is likely to grow at4 per cent annually during the same period compared to 5-8 percent for a pure hotel product.• Every business has its success and failure stories and timeshareis no exception.• From the time this concept was introduced in India, a lot ofcompanies have entered this segment out of which most havebeen successful and a few unsuccessful.Rtist @ Tourism
  14. 14. • Timeshare schemes are being run by both Public and Private sectorcompanies in India. Statistics from the latest survey of the timeshareindustry confirm that the consumer satisfaction index is reaching ahigh of 85%.• There are 40 timeshare companies, 80 resorts, 200,000 membershipswith 15,000 annual additions and 4000 units.• The average age of timeshare consumer is 42 years out of which89.8% are males having an average household size of 4 people with atypical children count of 1 to 2 children (AIRDA, 2008).• Even though the customers are quite happy with the quality oftimeshare resorts that they are offered still they feel that the numberof destinations (resorts) is quite less and they do not get much ontheir platter.Rtist @ Tourism
  15. 15. • However this problem can be overcome by having affiliation with anexchange company such as RCI, II, Dial an exchange, etc.• Having an affiliation from an exchange company is also crucial becausepractically it is not feasible for any of the timeshare companies to offer abunch of resorts to the customers.• Moreover having an affiliation also opens the international gateway for thecustomers.• The second issue is of annual maintenance charges which customers feel arequite high.• This issue can be tackled if companies start charging a lump sum amountwhich consists of the membership fee as well as the annual maintenancecharges right away at the time when a member gets enrolled.Rtist @ Tourism
  16. 16. • This can also be done considering customers have rated sale price as low inexpectation and low in experience.• (However the reason for sale price to be low in experience might be that thecustomers would have thought if they will rate it otherwise there may not bea hike in the future).• Moreover by charging the annual maintenance fee initially a customer will atleast psychologically feel that he has paid the entire amount and now it is histime to relax.• This also helps the company in two ways first, the company is assured thatthe whole amount of money is with them and there is no chance of customerdefaulting at a later stage.• Second, company is able to get more cash as compared to charging sale priceinitially and then charging annual maintenance charges later on.Rtist @ Tourism
  17. 17. • For the segment that private timeshare companies are serving, competitiveadvantage emerges out of overall condition, access & location of the resort,room furnishing, food, competence of the staff, view from the room andconvenience in buying timeshare.• There appears to be a potential in targeting the growing Indian middle classas the trend now is towards more fun filled holidays rather than VisitingFriends and Relatives (VFR).• The company may improve the condition of its resorts and furnishing of itsrooms as timeshare owners are the persons who will not come to the resortonly once but they are the people who are going to visit the resorts yearafter year and that too at least for a week’s time in one go.• The company was only having a few properties in its timeshare schemewhich are quite less as compared to any other timeshare company whichoffers hundreds of properties.Rtist @ Tourism
  18. 18. • The company can improve on the number of resorts by havingaffiliations with exchange companies and it can also considerinvolving all its properties in the timeshare scheme.• Moreover having an affiliation also opens the internationalgateway for the customers.• Whereas the tenure of ownership is concerned it is a positivesignal for the company which indicates that people are satisfiedand that is why they want the tenure to be increased.• Timeshare is a successful business venture around the world.However there are ups and downs in every business.Rtist @ Tourism
  19. 19. • If one looks at the internet one will find complaints of almostevery company, whether it is banking, insurance, telecom or anyother sector..• The similar story is with timeshare also but reports fromorganizations of repute such as AIRDA, ARDA etc. has provedthat most of the customers are satisfied with their timesharescheme.• It may be of interest to note that in case of private company theannual maintenance charges are of concern but customers arehappy with other things whereas in case of public companycustomers are more concerned with overall condition of theresort, room furnishing and tenure of ownership.Rtist @ Tourism
  20. 20. • This shows that upkeep of the resort comes at a cost andcustomers may have to bear on either side i.e. in terms ofannual maintenance charges or in terms of condition of theresort.• The competitive advantage of private and public sectorcompanies emerges out of view from the room, access to theresort, location of the resort, competence of the staff and food.• Fractional ownership has already been launched in India byCountry Club India ltd.Rtist @ Tourism
  21. 21. Review of literature• The WTO (1997) has stated that there are mounting evidencesto show that timeshare has a positive impact on developmentareas.• The financial benefits from timeshare include sales oftimeshare, maintenance fees, local taxes, on-site payroll, andthe purchase of travel facilities.• A timeshare development creates permanent full time and parttime jobs on site, and temporary jobs are created within thecommunity.• The conversion of hotel units to timeshare can release capitalfor much needed renovation in older hotels, and boostrevenues in the short time.Rtist @ Tourism
  22. 22. • The timeshare phenomenon has a fundamental advantage for atourism destination compared to the rest of the industry.• While other types of tourism products have to be promoted aneweach year, in timeshare the opposite is true. Once the timeshareuser has bought his weeks, he is an identified user of travelservices and is likely to be a good prospect for further timesharesales.• He is a guaranteed repeat client – and if he does not come,another owner and family will more than likely arrive, thanks tothe exchange system.• Negative feelings about timeshare arise from the selling practicesof some companies, but are then attributed erroneously to theproduct itself.Rtist @ Tourism
  23. 23. • A timeshare shouldnt be purchased-or sold-as an investment;its a lifestyle buy for consumers (Watkins, 2007).• Two divergent factors combine to drive the popularity oftimeshares ownership among hotel owners.• First, while the hotel operations earn revenues largely fromhotel room charges, timeshare resorts have multiple sources,which include timeshare contract sales, interest payments onmortgaged suites, maintenance fees and club membership fees.•• Secondly, timeshares tend to be immune to variations ineconomic performance because the timeshare owners arecontractually bound to occupy their units.Rtist @ Tourism
  24. 24. • From the consumer perspective, timeshares are not suitable for investmentproperty because the expensive marketing programmes inflate the prices.• The high marketing expenses force the property value to depreciateconsiderably over a short period.• Even with this problem, surveys suggest that the owners are generallysatisfied.• Consumers should not enter into timeshare contracts, however, forinvestment purposes but for buying a vacation in advance (Powanga andPowanga, 2008).• The future growth within the timeshare industry is likely to emanate fromthree factors i.e. the emergence of new types of timeshare products such asthe point system, the emergence of new markets for the timeshare productand the expansion of existing timeshare markets (WTO, 1997).Rtist @ Tourism
  25. 25. • Bornstein (2002) cited that in an interview with John Burlingame in2002 he stated that “Timeshare development is an incrediblyprofitable business which generates profits ranging between three tofive times normal profits from a regular real estate sale”.• The resort timeshare industry has been built on the compellingcommercial argument that the inherent profit from the realisation ofthe future value of the asset can be brought forward in time andrecognised on the date of sale (WTO, 2005).• The prevailing wisdom is that while not recession-proof, timesharingis better able to weather the ups and downs of economic cycles thanother segments of the hospitality industry.Rtist @ Tourism
  26. 26. • Unlike the rest of the hospitality industry, which took a nosedivein the months following 9/11, vacation ownership salescontinued to grow at a double-digit annual pace (Watkins,2008).• With regard to the purchase decision the industry survey in 1998found that the most important reasons for purchasing timeshareincluded flexibility, saving money, liking the resort and certaintyof quality accommodation (Crotts and Ragatz, 2002).• Acknowledgements:• SUKARN SHARMA, Ph.D. Asst. Professor, Manav Bharti University, Solan, (H.P) INDIA• NIMIT CHOWDHARY, Ph.D. Professor, Indian Institute of Tourism & Travel Management, Gwalior,(M.P) INDIARtist @ Tourism
  27. 27. Thank You…!!!©Ramakrishna Kongallae-mail: artist.ramakrishna@gmail.comRtist @ Tourism